What is a guarantor loan?
Guarantor Loans work differently to short-term loans; although the amount you want to borrow will be similar, a Guarantor Loan requires a ‘co-signature’ to ‘guarantee’ the loan. This means that if you are unable to make the repayments, the lender has a second person to ask for payment. It’s a type of unsecured personal loan.
A guarantor loan works in a similar way to when you need a guarantor for your rent, i.e. if you’re student and the landlord has concerns about you making the regular payments, or if you have bad credit and are applying for car finance.
You can compare guarantor loans on this website quickly, and applying for a guarantor loan is not an exhaustive process. The initial online application can take minutes to complete and submit once you go through to a lender’s website.
Most guarantor loan lenders will contact you via phone to verify a few details and go through the approval process. If approved, you can usually expect your funds to be with you in 24 to 48 hours (although this can be sooner). Make sure you check the individual lender’s website, terms and conditions and loan agreement in order to understand your guarantor loan thoroughly.
What risk do guarantor loans carry for the Guarantor
Those chosen to be guarantors are doing so at their own risk. It’s recommended that a guarantor only enters into this situation if they are absolutely sure that they can make up for any missed payments. As any missed repayments and debts are passed on to the guarantor there is a chance that their credit history and rating could be affected.
If a guarantor misses a payment that’s already been missed by you, then their own credit rating will be negatively affected. For more information on being a guarantor, check out our guides on how guarantors work, missed guarantor payments and the responsibilities of a guarantor.
Things to consider with a guarantor loan
Check out our further reading for those considering a guarantor loan.
- What happens if a guarantor cannot pay?
- How can being a guarantor affect your credit rating?
- Are secured loans better than unsecured loans?
Who can act as a guarantor?
A guarantor can be anyone over the age of 21, and while it’s usually a parent or family member it can technically be anyone you know. The chosen guarantor must have a good credit rating and should be able to prove that they can make the repayments should you miss them.
For more on who can act as a guarantor, check out our guide.